By Vikas Mehrotra
International Program of Valuation in the Hydrocarbons Industry
The bidirectional link between energy consumption and GDP growth is now accepted wisdom – this is not surprising since energy is an important factor of production, just as capital or labor or land are. Indeed, it can be argued that as more countries join the global economy, the link between energy consumption and GDP growth rate will get stronger, as emerging markets play catch up in key energy intensive sectors such as transportation and infrastructure development. What role do non-renewables such as hydrocarbons play in this global energy consumption, both today and over the next several decades?
According to Energy Information Administration (EIA) of the United States Department of Energy, hydrocarbons sources will continue to dominate the share of total energy consumption in the United States over the next three decades, albeit declining marginally from the current share of 81% to 78% in 2040. Likewise, EIA estimates show that global energy reliance on hydrocarbons mirrors these numbers. To be sure, renewable sources of energy are expected to grow, but from a low level, and even as far out as 2040, EIA estimates put renewable energy consumption to be around 13%. In short, hydrocarbons are expected to dominate energy production over the foreseeable future, despite tremendous advances in renewables. Perhaps in the distant future, humankind will rely on some as yet undiscovered energy source; but realistically, for the next several decades, hydrocarbons are likely to remain the bread and butter of our energy needs.
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